The spirit of bilateralism
The bitterness between India and Pakistan has often led to the worsening of several long- standing issues which could be resolved through minimum cooperation between the two governments. Under these circumstances, the possibility of enhancing bilateral trade appears bleak.
India granted the Most Favoured Nation status to Pakistan in 1996. The gesture, instead of helping Pakistani trade, further limited the access of Pakistani products into the Indian market due to the imposition of various nontariff barriers by the Indian government. India had been demanding Pakistan to give it the status of MFN as this would lead to the growth of bilateral fivefold. Pakistan reciprocated 16 years later by granting MFN status to India.
The decision met with two extreme responses in Pakistan. The gesture was either considered a step towards advancement, removing trust deficit and increasing bilateral relations between the two and described as a step taken in the ‘ national interest’ or it was viewed as ‘ national suicide’.
Removing the fear and mistrust that prevailed about the consequences of granting MFN status to India, their Ministry of Commerce said, “... the government of India has reviewed the policy... and decided to permit a citizen of Pakistan or an entity incorporated in Pakistan to make investments in India.”
Welcoming India’s decision, President of SAARC Chamber of Commerce and Industry, Shri Vikrajit Sahney said, “It is a very positive gesture showed by the Government of India, which will give Pakistani enterprises an ample opportunity to make investments in almost all sectors. Allowing Pakistan to invest in the global Indian market will serve as a confidence booster, eliminating previous doubts regarding attacking the fragile Pakistani market by dumping cheaper Indian goods in Pakistan. This step would allow India to export 7,500 tariff lines to Pakistan as compared to the current 2,000.”
Despite the heavily militarised border, smuggling constituents a major part of India- Pakistan’s underground economy. The conversion of this illegal trade into legal and official trade will ensure the availability of cheaper products in both countries. It will stimulate economic activity such as increased transport but the higher sales tax collection will also ensure higher revenues for both governments.
Although the ban on investments in space, defence and atomic energy will be strictly observed yet experts believe information technology, health, education and engineering sectors offer tremendous trade potential to both India and Pakistan. In an attempt to further boost trade, a second trading gateway has been opened along the border, allowing from a mere 150 to 600 trucks to move on a daily basis. The two countries have also eased visa curbs on business travel, which will further facilitate trade.
Granting of MFN status to Pakistan has also stimulated confidence- building measures ( CBMs) between the two neighbouring countries. Such measures work towards normalisation of trade and therefore stress on the eradication of all discrimination in trade with India by December 2012. Free trade allows Pakistan to import products and raw material from India at a cheaper rate, which in turn helps in reducing cost of production. Furthermore, the integrated check post ( ICP) through Wagah- Attari border effectively accommodates increased cargo movement. Both Indian and Pakistani ICPs are connected through new gates, which allow trade for 12 hours a day as compared to 8 hours in the past. The Custom Liaison Border Committee ( CLBC) assists in harmonising custom procedures through frequent interactions to deal with operational issues.
Keeping the spirit of bilateralism, two Pakistani banks have been allowed to open branches in India. Yasin Anwar, Governor of the State Bank of Pakistan has has said that United Bank Limited ( UBL) and National Bank of Pakistan ( NBP), have been given the ‘ green signal’ to operate in India.